Carter Warns He'll Veto Legislation Over Budget

By Art PineBy Art PineMarch 13, 1980

The White House warned Congress yesteray that President Carter will begin vetoing legislation that overshoots his budget as part of his new anti-flation strategy. Press secretary Jody Powell told reporters at a briefing that the president's rejection of a bunus-pay bill for military medical personnel on Tuesday was intended as a signal that Carter would not tolerate budget-busting.

"He will continue to use his veto whenever necessary." Powell said. The press secretary also lambasted a House subcommittee for voting yesterday to reject Carter's request for a $100 million saving in health outlays.

The administration's tough new stance came as the White House continued to delay final decisions on Carter's new anti-inflation package, calling off an expected announcement before a joint session of Congress tonight.

Officials said late yesterday Carter still had not approved the major elements of the proposal, which his top economic advisers have been wrestling with for more than two weeks.

There was apprehension by some observers that the announcement might lose its impact if the administration delayed much longer. Carter reportedly feared a televised speech might unduly raise expectations.

A group of key House and Senate Democrats who have been conferring with administration officials on which spending cuts Congress might accept is scheduled to meet with Carter at 5 p.m. today to discuss the budget situation.

The panel continued its negotiations late yesterday after meeting in midmorning with Federal Reserve Board Chairman Paul A. Volcker. The group has agreed on $11.7 billion in proposed spending cuts, but needs $8 billion more.

The negotiators failed yesterday to work out any agreement on how to deal with the defense budget. Insiders say the group is split sharply between those who want to trim military spending and others who want to increase it.

Meanwhile, officials disclosed the White House is considering asking Congress to enact a 10-cent-a-gallon increase in the federal gasoline tax as part of the new anti-innflation package.

Although no decisions have been made yet, the proposal is being discussed as a possible second stage in a two-part plan to raise $11 billion in new revenues to help balance the budget.

In the interim, the president would impose a $4-a-barrel oil-import fee, with the increase to be passed on in the form of higher gasoline prices. The fee would be withdrawn as soon as Congress enacted the gasoline tax.

Separately, the Council on Wage and Price Stability hinted that Carter may have to relax his current price guideline by between 0.5 and 1.5 percentage points if he agrees, as expected, to liberalize his pay standard.

The agency told the president's new Price Advisory Committee the move would be necessary to maintain the same relationship between the two guidelines that has prevailed since the wage-price program began.

Carter has agreed in principle to accept a recommendation by his separate Pay Advisory Committee to relax the current wage guideline to a range of 7.5 to 9.5 percent, from a flat 7 percent standard now.

The price guideline compromises a series of complex formulas that, taken together, allows companies to raise their prices by half a percentage-point more than they did on average in 1976 and 1977.

Carter's new anti-inflation package is expected to include some $15 billion in proposed spending cuts, a crackdown on credit-card use and excessive borrowing, and tougher enforcement of the current wage-price guidelines.

The move is designed to calm the nation's financial markets and convince the public that the government is serious about fighting inflation.

The bond market has been in turmoil recently over fears that inflation is mounting.

The oil-import fee and the 10-cent-a-gallon gasoline tax each would raise about $11 billion in new revenues, and eventually would trim gasoline consumption a modest 100,000 barrels a day. They also would increase primes.

The proposed budget-cutting package the congressional leaders have agreed to includes $1.7 billion in cuts by eliminating the states' portion of the revenue-sharing program and $1 billion from anti-recession aid to cities.

The proposal also would trim $1.6 billion in education monies, mainly from student loan programs; $850 million by delaying the welfare reform bill; $800 million by cutting strategic oil reserves; $1.3 billion in energy spending.

The House-Senate package also would trim $500 million from transportation grants. And it would raise $3.3 billion in new revenues by requiring banks to collect withholding taxes on interest and dividends paid to depositors.

However, congressional leaders acknowledge these agreements are not binding. Most of the cutbacks have been rejected in Congress by large majorities in earlier years. There is no guarantee Congress would go along now.

There also were these developments yesterday:

Senate ranking Committee Chairman William Proxmire (D-Wis.) sent letters to House and Senate leaders urging them to propose a congressional ceiling on all federal credit programs, whose growth is worrying the bond market.

Rep. Parren Mitchell (D-Md.), a leading black spokesman in Congress, warned the House Budget Committee against slashing social programs this year, arguing it would undo recent gains that blacks have made in employment.

Sen. Lloyd Bentsen (D-Tex.), chairman of the congressional Joint Economic Committee, raised fears that the housing industry could collapse as a result of the recent slump in the bond market.